Arthur J. Gallagher & Co.‘s second annual Benefits Strategy & Benchmarking Survey reveals that employers continue to see rising benefit costs in 2014. The survey examines how organizations are responding to healthcare reform and rising costs, as well as their approach to private exchanges, wellness and retirement programs, and other benefit trends and opportunities.
“Although organizations may be aware of the changes that are shaping the future of the employee benefits market, the survey suggests that many are not yet ready to face the challenges these changes will bring,” said James W. Durkin, Jr., President, Employee Benefit Consulting and Brokerage. “Those who adequately adapt to the current reality will optimize their ability to mitigate future costs.”
When asked to identify their greatest overall challenge, 67% of employers cited controlling benefit costs. Some of the leading strategies identified by the participants for containing benefit costs include:
- increasing employee plan contributions (54%)
- increasing deductibles (43%)
- increasing out-of-pocket maximums (36%)
- increasing co-payments (30%).
Attracting and retaining a competitive workforce
Given today’s dynamic workforce, employers are seeking to balance cost containment with employee engagement. Moreover, the increasingly diverse needs and preferences of the current workforce challenge employers to develop a benefits package that appeals to all employees. Survey results show:
- Retirement plans continue to shift toward a defined contribution model, with 64% of respondents offering a 401(k) plan. Of those, 70% match employee contributions.
- Employers continued to gravitate toward wellness programs with 44% of participants offering a program to their employees. However, even with the increase in the number of employers offering a wellness program, most programs (61%) have a budget of less than $10,000.
- Although employees are often interested in long-term care as a voluntary benefit option, 82% of employers do not offer this benefit.
U.S. organizations of all sizes and types are looking to contain healthcare and other benefit costs while competing successfully for talent. However, in today’s uncertain environment and ever-evolving employee regulatory landscape, only 31% of employers surveyed have quantified the cost impact of healthcare reform on their organizations. Just 10% of participating employers have a written total rewards or strategic benefits plan with measurable objectives.
“There’s no doubt that the changing benefits landscape will present organizations with complex challenges for years to come,” said Durkin. “A holistic, innovative, data-driven employee benefits strategy is needed to strike the optimal balance in managing the best interests of employees and employers. This approach allows organizations to respond to change with agility, helping them to minimize risk, maximize rewards and drive growth.”
More than 1,800 U.S.-based organizations participated in the survey spanning a wide range of industries, geographic regions, and employer sizes and types. The majority of participants (61%) have more than 100 full-time employees and 25% of participants employ 500 or more full-time employees. For-profit organizations account for 61% of participants, while 39% of participants are not-for-profit.